If practices uncover large or systemic billing problems that led them to receive overpayments, they should conduct statistical sampling to quantify the total potential amount of overpayments received.

Doing so will reduce the time and resources some practices will need to spend dealing with overpayments in the wake of the final rule HHS released Feb. 11 (MPCA 3/16). Practices that conduct statistical sampling won’t have to review every claim that may have been overpaid, says attorney Ross Burris with Polsinelli in Atlanta.

Statistical sampling — also known as extrapolation — can be particularly helpful when complying with the rule because failing to meet the deadline to return overpayments is a violation of the False Claims Act. Penalties currently include fines of $5,500-$11,000 per claim, treble damages (damages times three) and/or exclusion from the Medicare and Medicaid programs.

The Accountable Care Act requires overpayments to be returned within 60 days of being identified. The rule clarifies how providers go about doing so.

Now that HHS issued the rule, providers are likely to see an increase in enforcement of the requirement that overpayments must be returned, Burris says.

Industry experts didn’t want to speculate on what percentage of providers might be receiving overpayments and might fall into the category of having large or systemic billing problems. However, all types of providers have at least some overpayments — many of which occur without bad intent.

Statistical sampling is a methodology to apply the rate of billing errors found in a sample of claims to a similar total population of claims. It is frequently used by the HHS Office of Inspector General (OIG), the Department of Justice, zone program integrity contractors (ZPICs), recovery audit contractors and other auditors to calculate providers’ overpayments.

The final rule specifically allows providers to use extrapolation proactively to quantify the amount to be returned, using “sound and accepted principles” that include randomly selecting claims from the applicable population of similar claims and extrapolating only within the time frame covered by the population from which the sample was drawn.

Statistical sampling is very accurate if performed correctly, experts contend.

How to apply statistical sampling

To determine whether your practice should use statistical sampling, first conduct a probe sample or audit. Do so after you receive credible information that there may have been an overpayment.

You’ll probably need to tailor the audit, say to particular years or a particular identified coding issue, Burris says.

If the probe audit reveals a larger, more systemic problem, extrapolation may be appropriate. Several decisions need to be made, in large part depending on the circumstances.

Most overpayments merely involve billing errors — say by a new coding employee — and will be returned to your Medicare administrative contactor (MAC). In these cases, you typically can (but don’t have to) conduct your own extrapolation following CMS’ program integrity manual section 8.4, which outlines what CMS is looking for in extrapolation and using a statistical sampling tool.

One of the most popular statistical sampling tools for this purpose is called RAT-STATS, which was created by the OIG and is available free on its website along with an instruction guide.

“It’s pretty easy to use and you don’t need to be a statistician,” says Gary Keilty with FTI consulting in Washington, D.C. RAT-STATS even allows users to utilize different “confidence” levels (the degree of certainty that the sample correctly depicts the total population) and “precision” levels (the estimated range of accuracy) percentages, he adds.

CMS accepts RAT-STATS as a statistical sampling tool for extrapolation calculation purposes, although its use is not required and a MAC may not have a preferred method.

Once your calculation is complete, go to the refund form from the MAC and submit the overpayment, Burris says.

“Most of the time the MAC will simply say ‘Thank you,’ and that’s the end of it,” he says.

If you’ve uncovered more than a simple error, the fraud and abuse or Stark laws(*) may be implicated. If the government is already involved, you’ll need more manpower and will want to engage an experienced attorney to handle the issue, including hiring an expert statistician, determining which government entity is involved to return the overpayment to (and what else that may involve), what the statistical sampling will entail and how best to approach the government.

Often the provider representative and the government will agree to negotiate smaller claims populations or timeframes subject to extrapolation, look at the sample together or use a statistician to provide a report, and then the parties come to a settlement based on those discussions, Burris says.

Using an attorney also will keep your investigation protected under attorney-client privilege, Keilty says.

It’s important to identify which government agency is involved, since different agencies prefer different methods of statistical sampling. For example, the OIG, which handles repayments under its self-disclosure protocol for issues involving the antikickback statute, prefers extrapolation using a 90% confidence level and a 25% precision level, Keilty says.

Consider 6 extrapolation tips

1. Don’t automatically assume that a discovered error requires extrapolation. A small error involving one or a few claims does not rise to a systemic issue that lends itself to extrapolation, Burris says.

2. If you’re handling your own extrapolation, make sure it’s a method the government accepts. This includes utilizing RAT-STATS as a statistical sampling tool and utilizing preferred confidence and precision levels. If you hire an outside statistician, ask what method he/she uses and whether the government finds that method acceptable. The government may be more likely to challenge your sampling — and overpayment amount — if it’s less accepting of the method being used.

3. Make sure you choose the right type of sample and sample size. For example, the sample needs to be randomly generated. RAT-STATS and even Microsoft Excel contain random generators, Keilty says.

4. Be careful about what you’re including in the extrapolation. For example, extrapolation assumes the total population it’s being applied to is very similar. If it isn’t, you may be including too many claims and triggering a higher overpayment than you should be repaying.

5. Note that if you use extrapolation, you don’t need to make two repayments — one for the errors uncovered during the probe audit and another covering the extrapolated amount. You can include them in just one payment, Burris says.

6. Include documentation explaining how the extrapolation was conducted and what method was used. The final 60-day overpayment rule requires this information be included when reporting and returning the overpayment, Burris says.

In most cases, an audit of a Medicare or Medicaid provider will find a number of claims that are invalid. When the health care provider already has submitted claims and then collected a payment from the government, then any money from improper claims must be returned.

But what happens if the government suspects that the improper claims aren’t the result of innocent mistakes? If the government suspects that your mistakes were intentional?

Medicare Rule Changes and Drug Testing Advances

Up until January 1st, 2011, providers would bill Medicare once for each drug assay performed, even from the same urine sample. For example, a single sample would be used for 11 assays, and 11 claims lines would be submitted for the patient, each for a different drug that was being tested for.

But technology became more advanced, and testing improved to be more efficient. Machines could now check for a number of drugs at the same time. As a result, Medicare changed the rules so that testing for multiple drugs would be considered to be a single test.

This new rule would potentially reduce revenue by -90% for health care providers.

Outsourced Coding

Many providers use outsourced coding specialists to perform the paperwork of claim entry. In one case, the coders continued to submit 11 claims for each patient.

What was the result? More than 19,000 bad claims.

A ZPIC audit found these mistakes. It calculated the amount of improper payments and demanded reimbursement by the doctor, whereupon the doctor promptly paid all the money back. The ZPIC sent back a letter stating that “the matter is closed”.

Civil Penalties

But the matter may not be closed when you are audited by a ZPIC and then you pay back the money.

It could be as much as $10,000 for each wrongful act. Each improper claim would be considered separately. Another option for the government to pursue is to collect 2-3 times the amount of the over payment. So if you have paid back $250,000, then the additional penalty would be $500,000–$750,000.

The law is written so that even if you had no intent to defraud the government, that is not considered.

Under 42 USC 1320a–7a (i)7B “no proof of specific intent to defraud is required”. What can trigger Civil Money Penalties? The health care provider must “act[] in reckless disregard of the truth or falsity of the information” or could act “in deliberate ignorance”.

Blame it on the coder?

For most health care providers, subcontractors do the coding. Can they be blamed? Well, perhaps they could, but this will not get you out of Civil Money Penalties because the rules are such that any provider is responsible for their “agents”, and billing companies are considered to be “agents” for the provider.

“A principal is liable for penalties, assessments, and an exclusion under this section for the actions of the principal’s agent acting within the scope of the agency.”

How to Avoid Civil Money Penalties

Perform a Self-Audit.The law is written so that the way you act can make a difference.

By promptly performing a self-audit, at your own expense, and then paying back any wrong claims that are discovered, it may help give the impression that you are not a criminal, but instead only a provider who has temporarily run into a coding problem.

Take Education Seriously. When you receive an education letter, stop what you are doing and study the issue carefully.

Even if a doctor is not doing the day-to-day coding, they nevertheless should know the exact coding details of their services.

Document every event in which you discuss coding with them, and if you send instructions to your coder on how to file proper claims, get a confirmation back from them that they received it and will be making an needed changes to their procedures.

Maintain a Chronology. If you get a letter from the OIG (Office of Inspector General) then have ready a complete chronology of every communication with your coders, ZPICs and others in connection to the matter.

This may be one of the most valuable things you can do to show that you are not acting recklessly.

The more you do these things, the less likely is the OIG to conclude that you deserve to pay back much more than you already have.